Federal agents carry boxes out of Arc Electronics Inc. Wednesday, Oct. 3, 2012 in Houston. A Kazakhstan-born businessman was charged in the U.S. on Wednesday with being a secret Russian agent involved in a scheme to illegally export microelectronics from the United States to Russian military and intelligence agencies. (AP Photo/David J. Phillip)

The complex of offices of Apex System LLC ("Apex") in Moscow on Thursday, Oct. 4, 2012. Apex is a certified supplier of military equipment for the Russian government and a business owned by the accused Alexander Fishenko. US prosecutors allege that naturalized U.S. citizen Alexander Fishenko and six others "engaged in a surreptitious and systematic conspiracy" to obtain highly regulated technology from U.S. makers and sold them to Russian authorities. Fishenko and six others charged in the alleged scheme are expected to appear Thursday morning in U.S. Houston federal court. (AP Photo/Mikhail Metzel)

HOUSTON (AP) — A naturalized U.S. citizen accused of illicitly obtaining military cutting-edge microelectronics for Russia formally heard the charges against him Thursday in a case reminiscent of the Cold War era.

Alexander Fishenko and six others made their initial appearance Thursday in Houston federal court. They did not enter pleas. An eighth defendant appeared in court Wednesday.

An indictment unsealed Wednesday accuses Fishenko of scheming to purposely evade strict export controls for cutting-edge microelectronics. It also charges Fishenko with money laundering and operating inside the United States as an unregistered agent of the Russian government.

"We’re going to examine the charges very critically," said his attorney, Eric Reed. "There are some dramatic allegations in the indictment that we want to take a hard look at."

Fishenko was born in the former Soviet Union in what is now Kazakhstan and owns Houston-based Arc Electronics Inc. He and seven others were arrested following raids there by the FBI.

His wife, Viktoria, who was identified as a co-owner of her husband’s business but not charged, declined to comment Wednesday.

"I will speak when I know what’s going on," she said.

Co-defendant Svetalina Zagon wiped away tears as she was led away after the hearing. Prosecutors say Zagon was a saleswoman at Arc Electronics.

The Russian Foreign Ministry in a statement noted that the defendants are not charged with espionage. Officials said diplomats have met with one of the detained suspects. Foreign Ministry spokesman Alexander Lukashevich lamented the fact that the United States failed to inform the Russian authorities of the impending arrests.

The indictment alleges that since October 2008, the 46-year-old Fishenko and his co-defendants "engaged in a surreptitious and systematic conspiracy" to obtain the highly regulated technology from U.S. makers and export them to Russia.

U.S. authorities say the microelectronics could have a wide range of military uses, including radar and surveillance systems, weapons guidance systems and detonation triggers. They also say the charges come amid a modernization campaign by Russian military officials hungry for the restricted, American-made components.

"The defendants tried to take advantage of America’s free markets to steal American technologies for the Russian government," Loretta Lynch, U.S. attorney in Brooklyn, said in a statement.

Stephen L. Morris, head of the FBI office in Houston, called the charges an example of how some countries have sought to bypass export safeguards "to improve their defense capabilities and to modernize weapons systems at the expense of U.S. taxpayers."

According to court papers, Fishenko was born in the former Soviet Republic of Kazakhstan and graduated from a technical institute in St. Petersburg before coming to America in 1994. He holds U.S. and Russian passports and has frequently traveled overseas to do business, making tens of millions of dollars on exports, authorities said.

An analysis of Arc’s accounting records showed a "striking similarity between fluctuations in Arc’s gross revenues and the Russian Federation’s defense spending over the last several years," the court papers say. Investigators also recovered a letter to Arc from a Russian domestic intelligence agency lab complaining that microchips supplied by the company were defective, the papers add.

Phone calls and emails intercepted by U.S. investigators "constitute devastating evidence of Fishenko’s illegal procurement for the Russian government," the court papers say.

Prosecutors said the evidence revealed repeated attempts by Fishenko to cover his tracks. In one instance in March, he "directed an employee of a Russian procurement firm to ‘make sure that our guys don’t discuss extra information, such as this is for our military client,’" the papers say.

In an earlier conversation, Fishenko favorably referred to a business associate using "a Russian colloquialism for ‘spy’ or ‘secret agent,’" the papers add.

About a dozen FBI agents in Houston executed a search warrant on Wednesday at Fishenko’s firm, an unmarked business located in an industrial area in southwest Houston. They took at least 18 cardboard boxes of materials from inside the business to a large truck parked in an alley in the back of the business.

Under sentencing guidelines, Fishenko faces more than 12 years in prison if convicted on all charges. Hearings to determine whether the defendants will be allowed out of jail before trial are scheduled to start Friday.

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